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Why retailers might not need (or want) to invest in mobile apps

February 9, 2015 04:21 PM

While slick mobile services like Uber and Starbucks’ mobile app garner plenty of attention, many retailers have found they can drive significant sales from mobile shoppers without investing in apps, according to Forrester Research Inc.’s “The State of Retailing Online 2015” report.

The report, which is based on a survey of 71 retailers, skews toward large brands: 84% of respondents say their company’s total revenue topped $100 million last year.

The majority of those large brands, 56%, say that apps are not a key part of their mobile strategy for consumers. And 70% of store-based retailers say that apps are not a critical piece of the in-store tools used by their employees use to assist shoppers.

“Many retailers are finding that no matter what they do, they aren’t able to push consumers from using the mobile web to their mobile apps,” says the report’s author, Sucharita Mulpuru, Forrester Research Inc. vice president and principal analyst. “Apps are a big pain to keep updated and they cost a lot of money. There isn’t a lot of bang for the buck, particularly once they factor in the costs associated with getting an additional app download.”

Mulpuru expects some retailers that have apps will begin to pull them because they aren’t getting sufficient return on their investment to justify maintaining them. Instead of investing in their own mobile apps, she suggests they might see better returns investing in mobile marketing, such as Pinterest ads that can drive consumers to retailers’ mobile-optimized sites.

However, the Forrester/Shop.org report runs counter to other studies that show that mobile apps can be crucial for some retailers. For example, apps accounted for 42% of the 2014 mobile sales for the retailers ranked in the 2015 Internet Retailer Mobile 500, a survey of leading mobile retailers worldwide. That report shows that such retailers as Neiman Marcus Group Inc., No. 97 in the Mobile 500, Kohl’s Corp., No. 46, and No. 52 L Brands, parent company of Victoria’s Secret, derive more than 60% of their mobile revenue from apps.

Retailers’ decisions to put apps on the back burner haven’t hurt their bottom lines, the Forrester/Shop.org report suggests. On average, 28% of respondents’ sales stem from mobile devices—12% from smartphones and 16% from tablets. The respondents say their smartphone sales increased 87% year over year on average last year and tablet sales jumped 52%.

Those gains encourage retailers to invest in mobile. 58% of respondents cite mobile as one of their top three priorities for this year, which is more than any other area, including omnichannel efforts, marketing and site merchandising. And 85% of respondents say they plan to boost their spending on smartphone initiatives more than 20% this year (and 22% plan to increase their tablet initiatives more than 20%).

Many of those investments are adding or enhancing basic features and functions that focus on helping shoppers navigate their sites. Here are the top five smartphone features and functions that merchants plan to add or enhance this year:

Enable, or make it easier, for consumers to place orders for physical goods, 37%

Optimize e-mails for smartphones, 33%

Identify where products are sold, 33%

Add product reviews, 33%

Here are the top five tablet features and functions that merchants plan to add or enhance this year:

Add product reviews, 29%

Enable, or make it easier, for consumers to place orders for physical goods, 27%

Locate retailer stores, hours or directions, 25%

Optimize e-mails for tablets, 23%

Add mobile payment options, 19%

While retailers have plenty of plans to invest in mobile, their overall spending in the channel is still relatively small, the report says. The surveyed retailers have only 3.1 full-time employees, on average, dedicated to mobile development, and 32% of respondents spent less than $100,000 on smartphone development efforts last year while 68% spent less than $1 million. Fewer than one in five retailers—18%—spent $1 million or more on smartphone efforts. Respondents are spending even less on tablet developments; 46% spent less than $100,000 and only 8% spent more than $1 million.

Most retailers would be well-served to focus on meeting consumers’ relatively minimal expectations for mobile commerce—they want pages to load quickly and links that are easy to click—rather than spending a lot on flashy tools, Mulpuru says.

“Retailers don’t need a lot of bells and whistles because most of the time that isn’t what shoppers want,” she says.